Sand Spring Advisors LLC
February 15, 2004
by, Barclay T. Leib
Bill Gross certainly could have Gretchen Morgenson's job as a financial journalist if he ever wanted it. While Morgenson currently gropes for topics of interest to write about in the post bubble "eerie calm" of frothy markets, Gross remains as cogent and to the point as ever. We thoroughly enjoyed his most recent "Last Vigilante" posting.
Reading it also made us look back at a chart of T-Bond futures that we posted within a subscriber-only article last August 2, 2003 (shown below). At the time, we were expecting one last lurch lower in the T-Bond futures price, followed by a substantive rally to around 114-116.
A path quite similar to this has since transpired, the bond leaving its low tick on Aug. 14, 2003, and then recouping 61.8% of the June-Aug. 2003 decline. While prices could stop right at current levels, one must be attentive that a slightly greater 73.6% retracement could yet transpire. Either way, and using Mr. Gross's language, a "High Noon" bond top certainly approaches.
We also hear of late many rumblings from the Bush Administration and others that an adjusted currency policy is forthcoming from China -- at first perhaps just a floating peg or wider bands for the yuan.
Yet we cannot help but think that any such shift -- while intended to make the U.S. manufacturing labor force more competitive over the longer term -- will only help raise price inflation (or perceptions that such inflation will be forthcoming) within the U.S. in the short term. Right now, the U.S. is successfully exporting much of its inflation abroad. But if China revalues its currency, and goods assembled there and exported to the U.S. become more expensive because of a higher yuan exchange rate, our inflation stats could start to steadily move higher. Instead of stuffing our inflation on the Chinese, we will be reimporting it here.
It appears to us that President Bush -- in his typical myopic way -- has bought into some economic advisor's simplistic vision that the way to heal the U.S. jobs situation is to revalue the yuan. Yet in reality, even if the yuan were revalued tomorrow, any resulting jobs shift back toward the U.S. would never occur in time for the November elections. If such were to occur at all, this would take years. Instead, by trying to posture himself towards job creation via a yuan revaluation, President Bush might easily and unintentionally unnerve U.S. bond markets.
We are currently looking for the bond market rally to top somewhere between the recent 113-22 high and 115-19 (73.6% retracemnt level) in terms of the March 2004 T-Bond futures contract. Therafter, a nasty "C" wave down in price (up in yield) should transpire towards approximately a 5.64% 30-year yield level. Then, longer term, and after the U.S. consumer hits something of a "debt servicing wall" at higher interest rate financing levels, new all-time lows in bond yields likely still beckon. This tentative longer-term yield path is shown below.
This technical view is of course very much in synch with those currently espoused by Mr. Gross. But we want to go a step further than Mr. Gross and make sure that readers understand that a yuan revaluation will not be the desired panacea to solve all U.S. structural imbalances. Instead, it could be the "trigger" to more fully reveal these imbalances.
How Your Articles Are Delivered
Upon the processing of your credit card or the receipt of a personal check, Sand Spring will e-mail you the articles requested as a Word attachment, and also provide you with a WWW address and password to view the article on the web without using Word should you so desire. Confirmation of your order will be immediate, and the actual article will follow by e-mail typically within a few hours and in all cases before the opening of NYSE trading on the following day.
Ordering by Credit Card:
Our shopping cart is designed for both physical and subscription products, so do not be confused too much when it asks you for a shipping address. A correct address is important only for credit card authorization purposes. Your e-mail information is the most important piece of information to us for proper delivery of your article(s).
Sand Spring Advisors provides information and analysis from sources and using methods it believes reliable, but cannot accept responsibility for any trading losses that may be incurred as a result of our analysis. The opinions expressed are not intended as specific investment advice, and simply represent our personal views offered here under our right of free speech. Sand Spring Advisors is a NFA registered CTA/CPO, but is not a Registered Investment Advisor. We do not directly trade any client funds. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, and should always trade at a position size level well within their financial condition. Principals of Sand Spring Advisors may carry positions in securities or futures discussed, but as a matter of policy will always so disclose this if it is the case, and we will specifically not trade in any described security or futures for a period 5 business days prior to or subsequent to a commentary being released on a given security or futures.
If you order by credit card, your credit card will be billed as "Sand Spring Advisors LLC"
Take me back to the Sand Spring Home Page
Comments or Problems
Thank you for visiting Sand Spring Advisors LLC, Inc. We hope to hear from you again soon. For more information on Sand Spring Advisors actual programs, services, or to request a copy of a Disclosure Document, please phone us at 973 829 1962, FAX your request to 973 829 1962, or e-mail us at information@Sandspring.com
10 Jenks Road,
Morristown, NJ 07960
Phone: 973 829 1962
Facsimile: 973 829 1962
Best Experienced with
The material located on this website is also the copyrighted work of Sand Spring Advisors LLC. No party may copy, distribute or prepare derivative works based on this material in any manner without the expressed permission of Sand Spring Advisors LLC
This page and all contents are Copyright © 2002 by Sand Spring Advisors, LLC, Morristown, NJ